At 7:30 I woke up for my first class at 8:45 this morning. The weather quickly turned bad and rainy. When I left Switzerland, Milan was hot and humid. Now that I have come back it has switched to being cold and rainy. I went to my first class in a similar room to the language class. It was international monetary economics and the class focuses on foreign exchange markets, their history, and how the financial crisis affected currencies. Today we covered the era of global gold and how WWI and protectionism broke it down. I’m in the minority when I say this, but I think it would be a good thing to bring back the gold standard. Ever since the US gave up the gold standard the dollar has depreciated 80% in value due to inflation. Also, fiat systems allow governments and central banks to permit massive defecit spending and paying for it by printing money and debasing the currency. A gold standard would remove the ability of central banks to artificially lower interests rates and printing money while keeping government fiscally responsible. I will probably go into further detail about this in a new finance article, since my old gold standard article was wiped out.

After class, I went to my equity portfolio management class. The first and second lectures of the class basically reviewed how to organize financial data into charts and basic statistics. The professor seemed arrogant, but the after reading the syllabus, the course material was interesting. However, I may have to drop this class due to a scheduling conflict with my flight home and the final exam.

After class, I met up with Jared. We ate kebabs at the Turkish kebab shop and then went to the Castello Sforzesco. This was the same castle I found on Tuesday night, but today I got to see the inside. The castle served as a fortress for the Milanese, Spanish and later the Austrians to defend occupation of the city. From the inside the castle appears much larger ad more elaborate and I walked through each of the squares and drawbridges. So far it is my favorite tourist site in Milan with the glass roofed Galleria Vittorio. Jared and I then walked around a large park that was hidden behind the castle. Jared wanted to buy souvenirs for his friends, so we stopped by a souvenir stand and later a grocery store to get these. I ended up buying a knockoff AC Milan jersey for myself, I thought the shirt looked cool, but I am not a soccer fan and not willing to pay 70 euros for the authentic one versus 20 euros for a jersey that looks exactly the same. I also disagreed with Jared’s decision to buy souvenirs for his friends instead of his family, but that’s my opinion.

I walked to the Bocconi cocktail party at the SHU cafe. On the way, I got lost and found the Basilica of St. Lawrence which was an old cathedral surrounded by a row of ancient Roman columns. As a fan of ancient history it was interesting to see a cathedral from the fourth century.  Once I got to the cafe, all the food from the apertivo was gone and it was a loud mess with people clamoring around the bar. After about twenty minutes, I felt out of place and left. Maybe I’m being a little closed off, but I had a better time listening to ESPN podcasts and walking around the city than at the bar. That night I went to sleep and slept in until 9:30 the next morning.

In the morning I took care of school business including paying my semester’s rent, fixing the website, and uploading the Swiss posts. I then went to the second lecture for each of the classes I started previously. However, this time they started late and had class from 4:15 to 7:30 at night. I tend to the most productive and attentive in the morning and early afternoon, so no matter what is being discussed, I have a hard staying focused and even awake during night classes. That night I talked to my mother on Skype and caught up with her, made myself some dinner, and went to bed.

Today I only had one class. It was the history of economic thought class and the lecture was held from 8:45-10:15 in the morning. The professor basically discussed the economic theories of Aristotle and mercantilism. It has pouring heavy amounts of rain all day today, so after going to the bank to withdraw euros and hedge myself against a weak dollar, I have been staying inside my building today. Mainly I have been catching up on my reading and planning out the rest my time here.  That was my first three days of Bocconi classes.

May 6, 2008

Usually when one thinks of the Federal Reserve Board, they believe that the Fed stabilizes the value of our currency and the economy. However, the truth is actually the opposite. Since its inception in 1913, the Fed has nearly erased all of the value of the US dollar, created vicious boom and bust cycles that kill the economy while unfairly redistributing the wealth, and transformed the United States of America from the world’ s creditor to the world’s largest debtor and a nation based on debt.

The most damage that the Fed has done to the American economy is the complete debasing of the United States dollar. Since the Fed was instituted in 1913, the dollar has lost ninety-seven percent of its value. Before the Federal Reserve was instituted the consumer price index remained fairly stable for nearly the first one hundred years of America’s history. However, once the Fed came around, they irresponsibly increased the supply of money to artificially boost the economy; and by doing this the dollar has lost its value and high inflation occurs. In fact the dollars recent decline can easily be explained by the Fed’s continual lowering of interest rates and increase of money supply in an inflationary period at a faster rate than the rest of the world. In order to pay for the government’s outrageous deficit spending, the federal reserve prints more money to make for these debts. As a result the added money lowers the value of the existing dollars in circulation. Overall, the Federal Reserve has been the primary cause of inflation since its inception.

The Federal Reserve plays a great impact on the current cycle of boom and bust cycles and the economic instability that has occurred since 1913. In a capitalistic society, ups and downs in an economy are a given. However, the Federal Reserve by artificially altering money supply creates malinvestment to create artificial bubbles such as the Roaring 20’s, the dot-com boom in the 1990’s, and the 2002-2005 housing boom. The consequences of these bad investments are recession and/or depression once people realize the lack of foundation within the booming sector in which they are investing. Along with the devaluation of currency, the boom bust cycle of the Federal Reserve has hurt Americans (especially the middle class) through poor investments and capital losses.

Recently, the Federal Reserve has again cut the federal funds rate by another twenty-five base points recently despite the fact that inflationary troubles already exist. Ben Bernanke seems to be short sighted about rising inflation and the monetary flaws that the Fed instituted to lead to our current recession. Instead he thinks that increasing the money supply will help the economy even though that is what is causing the decline of the dollar’s value internationally and inflation. What can be done to reverse the damage of the dollar and restore sound money to America?

The solution to our monetary problems is disbanding the Federal Reserve and replacing it with the gold standard. Until 1971, the value of the dollar was backed up with a set amount of gold for each note. Once Nixon removed the gold standard inflation became rampant and the dollar has retained less than one fifth of his value since then. The fiat currency originally was based on treasury bonds, but with the recent subprime crisis, the Fed traded these bonds for bad mortgage debt this March. Basically our money is more worthless than zero, it has negative value. What needs to be done is to switch back to the gold standard through competing currencies. Individuals and businesses would be able to choose which money that they for transactions and savings. With the stability of a gold based currency, it would gain favor and ultimately replace the Federal Reserve note. Sound money holds off effectively against inflation and has consistent economic stability and the gold standard provides that while the Fed’s tinkering takes this away.